10:19 AM, 14th October 2020, About 10 months ago
In a speech by the Director of Consumer and Retail Policy for the FCA, Nisha Arora, it was outlined how lenders should support borrowers forced into taking mortgage payments holidays during the pandemic.
In the guidance below it sets out expectations for firms on how to support customers and work with them on their finances and repayment plans. While not penalising borrowers it does indicate how lenders will be able to show the mortgage payment holiday arrangements made on their credit file for future reference and to accurately reflect the arrangements made.
The FCA’s response to the pandemic was divided into 3 phases of guidance for lenders.
“Phase 1. We needed to work with you to deliver quick, clear, and simple support that was easy for consumers to understand and easy for firms to operationalise. In essence, this took the form of 3-month payment deferrals for those financially impacted by Covid. Recognising the temporary and exceptional nature of the support, we said the deferral should not result in a negative impact on customers’ credit files.
Phase 2. The first set of guidance lasted for 3 months so with people coming off payment deferrals in June we needed to review our approach. We carried out research to understand the uptake of payment deferrals and whether and what sort of further support might be needed.
We found that a majority of people coming to the end of their initial payment deferral would be able to restart repayments, and some would be able to afford partial repayments, but others would need to continue the support they had.
So it was clear that different people would have different needs. We extended the guidance to 31 October, retained the payment deferral support but shifted away from the earlier blanket approach towards a greater range of support being provided, depending on customers’ needs.
Phase 3. Again this guidance was temporary. So as people moved off their second payment deferrals and as the 31 October deadline was coming closer we needed to assess what if any further support would be needed.
Around 1.8 million people have taken a deferral on a mortgage and around 1.7 million a deferral on a credit card or personal loan. We know that over 80% of people with payment deferrals found them helpful and that many would have struggled without them. A majority of people who took them have been able to repay but a significant number of people will need further support. For those in the subprime markets the future looks particularly uncertain.
We have recently published new guidance on both mortgages and credit, which aims to ensure that both people coming to the end of payment deferrals, and those who are impacted by coronavirus after the current guidance ends on 31 October, get the support they need.
The guidance builds on the existing forbearance framework in our rules and our Principles for Businesses. It sets expectations based on what we consider to be industry good practice in forbearance and debt collection, based on individual circumstances and needs, and importantly that reflect the greater challenges and uncertainties of the pandemic environment.
Over 80% of people with payment deferrals found them helpful and many would have struggled without them. A majority of people who took them have been able to repay but a significant number will need further support
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